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My Product is Better Than Yours...but Can I Say That?

Friday, March 28, 2008 ) - James Katz

Comparative advertising continues to be one of the most popular forms of promoting consumer products in the marketplace. According to Advertising Standards Canada, this type of advertising consists of comparing the advertiser`s products or services with those of another, with regard to their characteristics, performance, consumer preference or value. If properly set out, the typical comparative advertisement will instantly convey to consumers that your product is simply better than that of the competition, without the public having to go through the time and expense of making this comparison themselves. This type of advertising does, however, have its pitfalls, and an improperly conceived comparative advertisement could result in civil liability for trade slander.

An action for trade slander is one of several legal remedies that can be used to combat anti-competitive activity in the marketplace. Other related legal remedies include the tort of passing off (sometimes referred to as common law trade-mark infringement), as well as statutory provisions under both the Competition Act and the Trade-Marks Act which protect against false advertising and unfair competition. In fact, it is not uncommon to see all of these causes of action lumped together in one claim.

Trade slander occurs when untrue information about a competitor`s products or services is conveyed to the public with the intent to harm the competitor, and which results in the competitor suffering economic damage. Also known as injurious falsehood or trade libel, this tort is designed to protect the reputation and goodwill a business has established in its goods and services.

At the outset, is it important to note that not all technically "untrue" statements made in comparative advertising will give rise to an action in trade slander: it has long been held by the courts that the promoting of goods by comparing them to those of others is acceptable, as long as such comparisons do not bring the goods of the latter into disrepute. This type of statement is referred to in the case law as "puffing," the most common form of which are statements that simply claim in various forms that "my product is the best." Such general statements, which amount to an indirect statement that the product of a competitor is inferior, will not attract liability. This is because such statements are commonly employed by traders, are not taken too seriously by the buying public, and rarely result in economic damage to the competitor.

However, specific statements disparaging your competitor`s product which are untrue will constitute trade slander. These statements include ones that point out that the goods of a competitor are defective or substandard in some way. If the court is satisfied that a "reasonable person" would believe that such claims made in the course of comparative advertising are true, then they may be actionable.

In order to succeed in an action for trade slander, each element of the tort as outlined about must be proven by the plaintiff to the court`s satisfaction. Thus, as an initial first step, it is up to the plaintiff to prove that the statements complained of are in fact false. This is in marked contrast to actions for defamation of character, where the falsity of the defamatory statements is presumed to be true in the first instance. In either case, however, if the defendant is able to prove that the impugned statements made by it are in fact true, then the plaintiff`s action will fail: this is known as the defence of justification.

Having established the falsity of the defendant`s statement, the plaintiff in a trade slander action must next show that the defendant either made the untrue statements maliciously, or made them with a lack of bona fide intention. This element of the tort is notoriously hard to prove, as it involves showing to the court`s satisfaction what the motive behind the making of the false statements was. In some cases, however, the overarching facts of the particular case can give rise to a finding of malice sufficient to support the cause of action. Because proving malice is difficult, prospective plaintiffs should therefore always consider if they can also bring a claim under Section 7(a) of the Trade-Marks Act, which is essentially a codified form of an action for trade slander that has removed the requirement of proving malice.

The final element that must be established in making out a successful claim for trade slander is proof of resulting economic damage. At common law, the plaintiff is required to prove it has suffered special damages, which typically consist of lost sales, contracts or customers which can be directly or reasonably attributed to the defendant`s false statements. Proof of such damages, like proof of malice, is also a major stumbling block in trade slander actions. In Ontario, however, provisions of the Libel and Slander Act have removed the requirement to prove special damages in situations where the trade slander occurred in print form.

Finally, it is important to note that, as a creature of the common law, the tort of trade slander continues to evolve. Recent Canadian court decisions, for example, indicate that some judges are willing to allow actions for trade slander even in cases where the competitor or its product are not directly identified in the defendant`s advertisement. This is especially true in cases where the participants in the relevant market are all well known by the public, such that the identity of the targeted competitor can be garnered by implication.

It is therefore clear that the law of trade slander continues to expand and to apply to new scenarios, such that the line between acceptable and unlawful advertising is now more blurry than ever. In light of this, obtaining the proper legal advice prior to publishing any comparative advertisement is vitally important for the protection of your business and its reputation.

James Katz is an associate lawyer with BrazeauSeller.LLP. He practices in the areas of intellectual property and litigation matters.